Jobner Bagh STN Road, Jaipur support@taxwink.com

Key Features of Limited Liability Partnership (Amendment) Act, 2021

Key Features of Limited Liability Partnership (Amendment) Act, 2021

Key Features of Limited Liability Partnership (Amendment) Act, 2021

The Limited Liability Partnership (Amendment) Act, 2021 recently got the assent of the Hon’ble President of India. This Act seeks to amend the Limited Liability Partnership Act, 2008. The Act has been brought to ease the regulations in the case of Limited Liability Partnerships (LLP) by decriminalization of certain offences and introducing some new concepts & provisions in LLPs. In this article, we are discussing salient features of the Limited Liability Partnership (Amendment) Act, 2021.

 

 Objectives & key features of the LLP (Amendment) Act 2021

Decriminalization of certain offences

  • The Act seeks to decriminalize offences that are related to minor compliance issues which will ensure ease of doing business. The Act decriminalises certain provisions and imposes penalties in its place such as: (i) Changes in partners of LLP (ii) Change of Registered Office (iii) Filing of Statement of account and solvency (iv) Arrangement between LLP and its creditors or partners (v) Reconstruction or amalgamation of an LLP
  • The Current law has 24 penal provisions, 21 compoundable offences and 3 non-compoundable offences. The Act decriminalizes 12 such offences. These offences will be shifted to In-house Adjudication Mechanism (IAM) instead of being treated as criminal offences.

Change in the name of LLP

The LLP (Amendment) Act empowers the Central Government to direct an LLP to change its name if its name is undesirable or is identical to an existing LLP or a registered trademark, within a period of 3 months from the date of issue of such direction. If the company fails to comply with the direction, the Central Government shall allot a new name to the company in the prescribed manner and the Registrar of companies shall enter the new name in the register of LLP in place of the old name.

Concept of Small LLP introduced like small companies

  • Clause (ta) has been inserted to section 2(1) of the Act introducing the concept of “Small Limited Liability Partnership” in line with the concept of “small companies”.  
  • Small Limited Liability Partnership means a limited liability partnership:
    (i) the contribution in which does not exceed Rs. 25 Lakhs (or such higher amount not exceeding Rs. 5 crores as may be prescribed) and 
    (ii) the turnover of which, as per the Statement of Accounts & Solvency for the immediately preceding financial year, does not exceed Rs. 40 Lakhs (or such higher amount not exceeding Rs. 50 crores as may be prescribed)

The Central Government may also notify certain LLPs as start-up LLPs. Small LLPs would be subject to lesser compliances and lesser penalties in the event of defaults.

Increase in punishment in case of fraud

If an LLP or its partners act with an intention to defraud their creditors or for any other fraudulent purposes, every person who is knowingly party to it is punishable with imprisonment of up to 2 years in addition to fine. The Act is amended to increase the maximum imprisonment term from two year to five years.

Prescribing Standards of Accounting & Standard of Auditing

Section 34A of the LLP (Amendment) Act provides that the Central Government in consultation with National Financial Reporting Authority (NFRA)-

(a) prescribe the Standards of Accounting and
(b) prescribe the Standards of Auditing, as recommended by the Institute of Chartered Accountants of India

Compounding of Offences

  • Section 39 of the Act at present provides for compounding of offences by the Central Government on payment of an amount which may extend up to the maximum fine prescribed for the offence. Present Section 39 has been substituted by a new section.
  • The newly substituted section 39 provides that the Regional Director or any other officer not below the rank of Regional Director (authorised by Central Government) may compound any offence under this Act. The amount imposed shall be within the minimum and maximum fine prescribed for the said offence.
  • If any offence by an LLP or its partners is compounded, then a similar offence cannot be compounded within a period of 3 years.

Special courts for speedy trial of offences

  • A new section 67A has been inserted to provided that the Central Government may establish or designate special courts for speedy trial of offences under the LLP Act.
  • The Special court shall consist of-
    (i) 
    A Session Judge or an Additional Sessions Judge (in case of an offence punishable with imprisonment of 3 years or more); and
    (ii) 
    A Metropolitan Magistrate or a Judicial Magistrate of the First class (in case of any other offences)

Reduction of Additional Fee u/s 69

  • Presently, Section 69 of the LLP Act prescribes that any document or return to be filed with the registrar may be filed with a delay up to 300 days from the due date on payment of additional fees of Rs. 100 per day.
  • This section has been amended with a view to reduce additional filing fees on delayed filing of documents or return.
  • Further, it is provided that different fee or additional fee may be prescribed for different classes of LLPs or different documents or returns required to be filed under the LLP Act.

A reduced additional fee will lead to ease of doing business for start-up LLPs and small LLPs and help to reduce compliance pressure on them.

Appeal to Appellate Tribunal

Under LLP Act, appeals against the orders of the Tribunal lies with the National Company Law Appellate Tribunal (NCLAT). The LLP (Amendment) Act further provides that appeals cannot be made against an order that have been passed with the consent of the parties. Further, appeals must be filed within 60 days (or further extended period of 60 days) of the receipt of the order.

Appointment of Adjudicating Officers

Section 76A has been inserted to the LLP Act to provide that the Central Government may appoint adjudicating officers (not below the rank of Registrar) for the purpose of awarding penalties in the matters of non-compliance or defaults under the LLP Act. Any person aggrieved by the order of Adjudicating Officer may prefer an appeal to jurisdictional Regional Director.

 

 

About Author: The author of the article is CA Naveen Goyal who is a practising Chartered Accountant in Jaipur. He specialises in the field of Income Tax, International Taxation and Indirect Taxes (GST). He can be reached at: 09660930417

 

Disclaimer: The article is based upon the LLP (Amendment) Act, 2021 and is summarised for informational purposes only. Readers are requested to act diligently and consult any expert before relying upon the information as given in the article. Taxwink is not responsible for any loss or damage caused to any person on the basis of reliance upon the content.

 

 

 

LLP Amendment Act 2021

Download

Request a Call Back

We’re here to help and answer any question you might have. We look forward to hearing from you 🙂



These are the personal views of the author and the Taxwink.com is not responsible in regard to correctness of the same.

Author Bio

Qualification:
Bio: The article has been contributed by the team of Taxwink dedicated to provide knowledge and updations to their users. For support mail at: support@taxwink.com
Total Posts: 698
`
Unsubscribe